1031 Real Estate Exchange and the Importance of a Qualifying Intermediary

A 1031 real estate exchange can provide great benefit to your financial net worth and is one of the most important tools in a real state investors' toolbox. This article will specifically focus upon the importance of choosing a very good qualifying intermediary and what factors you should consider when deciding which one to work with.

A qualifying intermediary is the most critical piece of the puzzle when looking at doing a 1031 real estate exchange. These are professional companies will ensure that you satisfy all of the IRS regulations regarding doing your exchange along with holding the money in escrow until you have found the properties which you will exchange. If certain guidelines are not properly followed, you can lose your ability to do a 1031 tax exchange and have to pay the financial consequences so be sure to do your due diligence.

Many of the same factors which you'll probably look use when searching for a new business partner will come into play when choosing a qualifying intermediary. You want to first check on the track record of the qualifying intermediary. If a company has been around for about 10 years, that is a good sign. The IRS clarified its guidelines regarding 1031 real estate exchanges in 1991. If the company is over 10 years old that means it has seen the changes in the industry and has considerable experience. You also want to check on the background of a company and where it operates. If you're looking for a property in Alabama and a qualifying intermediary you have spoken to has never done a 1031 tax exchange in Alabama, you'll probably want to consider using a different qualifying intermediary. You want someone who has the experience and the track record. You also want to see what kind of support and help are available with this company. There are very tight guidelines regarding when you identify properties as well as when you buy these properties so you want to make sure that there's enough help so that you will meet the guidelines. Also use a qualifying intermediary who uses strong security features and reasonable fees. Make sure to talk with several qualifying intermediaries to compare some these factors. Finally you should try to get a couple of references from the qualifying intermediary to make sure that they have done good work for other people in the past. If the company refuses, do not hire them.

A qualifying intermediary has a very important part within this picture and you must work to find the one to do business with. This may well be the most important decision you make throughout your work on a 1031 tax exchange.

Ellen writes for Great Hawaii Real Estate where you can find Molokai real estate listings to great Molokai condos, homes and land.